No Stress in Credit

JC Parets
October 20, 2022

The bond market is the biggest and baddest market of them all.

All these crypto currencies can go to zero and no one who matters will care.

The entire pot industry can disappear tomorrow and it won't matter.

Small-cap stocks aren't relevant, from a systemic perspective.

Do you know what matters? The bond market.

And if there's real stress out there in financial markets, you are going to see it show up in bonds.

It's just math.

But a funny thing happened in Q2 this year. High Yield Credit spreads began to tighten.

If there was real stress, you would be seeing them widening.

In this chart below we're looking at lower lows in the S&P500 but higher lows in the ratio between Junk Bonds and US Treasury Bonds:

Credit spreads are tightening.

They're not blowing out.

If you're in the 'end of the world' camp, how come the bond market doesn't agree with you?

Last night we talked about all of this, and everything else we need to know as we make our way through the most bullish time of the 4-year cycle, and enter the most bullish 3 month period of the year.

But which stocks are we buying?

We discussed all of them on our Live Conference Call last night.

Premium Members can watch the replay here and download the slides.

JC

 

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